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  • 1. BANKING INDUSTRY VISION 2010 BY IBA COMMITTEE NOVEMBER 2003 CHAIRMAN S C GUPTAChairman and Managing Director, Indian Overseas Bank 1
  • 2. PREAMBLEOur Vision statement is not a prediction of what will happen in the future; it is alsonot a wish list of desirable, but unattainable goals. Rather, it is a statement of whatwe believe as to where the banking industry will position itself and is possible. Ithelps to provide a direction to the course to be followed and aims to be achieved inthe future. Present domestic and global scenario and trends would help to evolve theobjectives, which are realizable in the future. The Vision Report on Indian BankingIndustry visualizes development of the domestic financial sector into a mature anddynamic industry to function efficiently and effectively as an intermediary, both, at thenational and international levels. The vision statement also sets goals for the bankingindustry to be achieved in the next 5-10 years. Where the Vision is one year, cultivate Flowers Where the Vision is Ten years, cultivate Trees Where the Vision is eternity, cultivate People - Oriental saying 2
  • 3. CONTENTS Chapter Description Page No No Our Vision 4–5 1 Introduction 6–7 2 Emerging Economic Scene 8 – 11 3 Future Landscape of Indian Banking 12 – 14 4 Change in the structure of banks 15 – 18 5 Product Innovation and Process Re-engineering 19 – 20 6 Technology in Banking 21 – 22 7 Risk Management 23 – 25 8 Regulatory and Legal environment 26 – 29 9 Rural and Social Banking issues 30 – 32 10 Human Resource Management 33 – 34 Action Points arising out of Vision Report 35 – 36AnnexuresI Macro Magnitudes of India Banks visualized for the year 2010.II Scheduled Banking structure in India as on 31.3.2003III Structure of Indian Commercial Banks 2003IV Financial Results of Commercial banks 2001-03 3
  • 4. OUR VISIONOUR VISION IS TO EVOLVE INTO A STRONG, SOUND AND GLOBALLY COMPETITIVEFINANCIAL SYSTEM, PROVIDING INTEGRATED SERVICES TO CUSTOMERS FROM ALLSEGMENTS, LEVERAGING ON TECHNOLOGY AND HUMAN RESOURCES, ADOPTING THEBEST ACCOUNTING AND ETHICAL PRACTICES AND FULFILLING CORPORATE AND SOCIALRESPONSIBILITIES TOWARDS ALL STAKEHOLDERS.Our Vision is of an integrated banking and finance system catering to all financialintermediation requirements of customers. Strong market players will strive touncover markets and provide all services, combining innovation, quality, personaltouch and flexibility in delivery. The growing expectations of the customers are thecatalyst for our vision. The customer would continue to be the centre-point of ourbusiness strategy. In short, you lose touch with the customer, and you loseeverything.It is expected that the Indian banking and finance system will be globally competitive.For this the market players will have to be financially strong and operationallyefficient. Capital would be a key factor in building a successful institution. Thebanking and finance system will improve competitiveness through a process ofconsolidation, either through mergers and acquisitions through strategic alliances.Technology would be the key to the competitiveness of banking and finance system.Indian players will keep pace with global leaders in the use of banking technology. Insuch a scenario, on-line accessibility will be available to the customers from any partof the globe; „Anywhere‟ and „Anytime‟ banking will be realized truly and fully. At thesame time „brick and mortar‟ banking will co-exist with „on-line‟ banking to cater tothe specific needs of different customers.Indian Banking system has played a crucial role in the socio-economic developmentof the country. The system is expected to continue to be sensitive to the growth anddevelopment needs of all the segments of the society.The banking system that will evolve will be transparent in its dealings and adoptglobal best practices in accounting and disclosures driven by the motto of value 4
  • 5. enhancement for all stakeholders.“A vision is not a project report or a plan target. It is an articulation of thedesired end results in broader terms” - A.P.J.Abdul Kalam CHAPTER – 1 INTRODUCTION1.1 Financial Sector Reforms set in motion in 1991 have greatly changed the face of Indian Banking. The banking industry has moved gradually from a regulated environment to a deregulated market economy. The market developments kindled by liberalization and globalization have resulted in changes in the intermediation role of banks. The pace of transformation has been more significant in recent times with technology acting as a catalyst. While the banking system has done fairly well in adjusting to the new market dynamics, greater challenges lie ahead. Financial sector would be opened up for greater international competition under WTO. Banks will have to gear up to meet stringent prudential capital adequacy norms under Basel II. In addition to WTO and Basel II, the Free Trade Agreements (FTAs) such as with Singapore, may have an impact on the shape of the banking industry. Banks will also have to cope with challenges posed by technological innovations in 5
  • 6. banking. Banks need to prepare for the changes. In this context the need for drawing up a Road Map to the future assumes relevance. The idea of setting up a Committee to prepare a Vision for the Indian Banking industry came up in IBA, in this background.1.2 Managing Committee of Indian Banks‟ Association constituted a Committee under the Chairmanship of Shri S C Gupta, Chairman & Managing Director, Indian Overseas Bank to prepare a Vision Report for the Indian Banking Industry. The composition of the Committee is given at the end of the report.1.3 The Committee held its first meeting on 23rd June 2003 at Mumbai. Prior to the meeting the members were requested to give their thoughts on the future landscape of the banking industry. A discussion paper based on the responses received from members was circulated along with a questionnaire eliciting views of members on some of the specific issues concerning anticipated changes in the banking environment. In the meeting, which served as a brainstorming session, members gave their Vision of the future. A second meeting of the Committee was held at Chennai on 7th August 2003 to have further discussions on the common views, which emerged in the first meeting, and also to examine fresh areas to be covered in the study. 6
  • 7. 1.4 The Vision Statement prepared by the Committee is based on common thinking that crystallized at the meetings. In the Chennai meeting it was decided to form a smaller group from among the members to draft the report of the Committee. The group met thrice to finalize the draft report. The report was adopted in the final meeting of the Committee held at Mumbai.1.5 When we talk about the future, it is necessary to have a time horizon in mind. The Committee felt, it would be rather difficult to visualize the landscape of banking industry say, 20 years hence due to the dynamic environment. While Government of India brought out India Vision 2020, the Committee is of the view that the pace of changes taking place in the banking industry and in the field of Information Technology would render any attempt to visualize the banking scenario in 2020, inconceivable. The entire financial services sector may undergo a dramatic transformation. It was, therefore, felt that we should set our goals for the near future say, for 5-10 years hence and appropriately call this exercise “Banking Industry – Vision 2010”. “I am confident that India will become a Developed Nation by 2020. Come, let us strive together to turn this resolve into reality” – Atal Bihari Vajpayee 7
  • 8. CHAPTER - 2 EMERGING ECONOMIC SCENE2.1 The financial system is the lifeline of the economy. The changes in the economyget mirrored in the performance of the financial system, more so of the bankingindustry. The Committee, therefore felt, it would be desirable to look at the directionof growth of the economy while drawing the emerging contours of the financialsystem. The “ India Vision 2020" prepared by the Planning Commission,Government of India, is an important document, which is likely to guide the policymakers, in the years to come. The Committee has taken into consideration theeconomic profile drawn in India Vision 2020 document while attempting to visualisethe future landscape of banking Industry.2.2 India Vision 2020 envisages improving the ranking of India from the present 11 thto 4th among 207 countries given in the World Development Report in terms of theGross Domestic Product (GDP). It also envisages moving the country from a low-income nation to an upper middle-income country. To achieve this objective, theIndia Vision aims to have an annual growth in the GDP of 8.5 per cent to 9 per centover the next 20 years. Economic development of this magnitude would seequadrupling of real per capita income. When compared with the average growth inGDP of 4-6% in the recent past, this is an ambitious target. This would call forconsiderable investments in the infrastructure and meeting the funding requirementsof a high magnitude would be a challenge to the banking and financial system.2.3 India Vision 2020 sees a nation of 1.3 billion people who are better educated,healthier, and more prosperous. Urban India would encompass 40% of thepopulation as against 28 % now. With more urban conglomerations coming up, only40% of population would be engaged in agricultural sector as against nearly twothirds of people depending on this sector for livelihood. Share of agriculture in theGDP will come down to 6% (down from 28%). Services sector would assume greaterprominence in our economy. The shift in demographic profile and composition ofGDP are significant for strategy planners in the banking sector. 8
  • 9. 2.4 Small and Medium Enterprises (SME) sector would emerge as a majorcontributor to employment generation in the country. Small Scale sector hadreceived policy support from the Government in the past considering theemployment generation and favourable capital-output ratio. This segment had,however, remained vulnerable in many ways. Globalization and opening up of theeconomy to international competition has added to the woes of this sector makingbankers wary of supporting the sector. It is expected that the SME sector will emergeas a vibrant sector, contributing significantly to the GDP growth and exports.2.5 India‟s share in International trade has remained well below 1%. Being not anexport led economy (exports remaining below 15% of the GDP), we have remainedrather insulated from global economic shocks. This profile will undergo a change, aswe plan for 8-9% growth in GDP. Planning Commission report visualizes a moreglobalised economy. Our international trade is expected to constitute 35% of theGDP.2.6 In short, the Vision of India in 2020 is of a nation bustling with energy,entrepreneurship and innovation. In other words, we hope to see a market-driven,productive and highly competitive economy. To realize the above objective, we needa financial system, which is inherently strong, functionally diverse and displaysefficiency and flexibility. The banking system is, by far, the most dominant segmentof the financial sector, accounting for as it does, over 80% of the funds flowingthrough the financial sector. It should, therefore, be our endeavor to develop a moreresilient, competitive and dynamic financial system with best practices that supportsand contributes positively to the growth of the economy.2.7 The ability of the financial system in its present structure to make availableinvestible resources to the potential investors in the forms and tenors that will berequired by them in the coming years, that is, as equity, long term debt and mediumand short-term debt would be critical to the achievement of plan objectives. The gapin demand and supply of resources in different segments of the financial markets hasto be met and for this, smooth flow of funds between various types of financial 9
  • 10. institutions and instruments would need to be facilitated.2.8 Government‟s policy documents list investment in infrastructure as a major areawhich needs to be focused. Financing of infrastructure projects is a specializedactivity and would continue to be of critical importance in the future. After all, a soundand efficient infrastructure is a sine qua non for sustainable economic development.Infrastructure services have generally been provided by the public sector all over theworld in the past as these services have an element of public good in them. In therecent past, this picture has changed and private financing of infrastructure hasmade substantial progress. This shift towards greater role of commercial funding ininfrastructure projects is expected to become more prominent in coming years. Therole of the Government would become more and more of that of a facilitator and thedevelopment of infrastructure would really become an exercise in public-privatepartnership. „India Infrastructure Report‟ (Rakesh Mohan Committee - 1996) placedfinancing of infrastructure as a major responsibility of banks and financial institutionsin the years to come. The report estimated the funding requirements of varioussectors in the infrastructure area at Rs 12,00,000 crore by the year 2005-06. Sincethe estimated availability of financing from Indian financial institutions and banks wasexpected at only Rs 1,20,000 crore, a large gap is left which needs to be filledthrough bilateral/multilateral/government funding.2.9 It has been observed globally that project finance to developing economies flowsin where there is relatively stable macro-economic environment. These includeregulatory reforms and opening of market to competition and private investment.Liberalized financial markets, promoting and deepening of domestic markets, wideruse of risk management tools and other financial derivative products, improved legalframework, accounting and disclosure standards etc are some of the other aspectswhich would impact commercial funding of infrastructure projects. 10
  • 11. 2.10 The India Vision document of Planning Commission envisages Foreign DirectInvestments (FDI) to contribute 35% (21% now) to gross capital formation of thecountry by 2020. Government has announced a policy to encourage greater flow ofFDI into the banking sector. The recent amendment bill introduced in Parliament toremove the 10% ceiling on the voting rights of shareholders of banking companies isa move in this direction. The working group expects this to have an impact on thecapital structure of the banks in India in the coming years.2.11 Consequent to opening up of the economy for greater trade and investmentrelations with the outside world, which is imperative if the growth projections of IndiaVision 2020 were to materialize, we expect the banking Industry‟s business also tobe driven by forces of globalization. This may be further accentuated with therealisation of full convertibility of the rupee on capital account and consequent freeflow of capital across the borders. An increase in the income levels of the peoplewould naturally lead to changes in the spending pattern also. This could result inlarger investments in the areas like entertainment and leisure, education, healthcareetc and naturally, these would attract greater participation of the banking system.2.12 On the basis of the projection made by the Draft 10th Five Year Plan onrelevant macro indicators such as GDP and extending the trend for a further periodof three years, it is estimated that GDP at current market prices during 2009-10would be Rs.61,40,000 crore. Taking into account the on-going reform measures,expected Basel II needs, and financial dis-intermediation, the pace of expansion inthe balance sheets of banks is likely to decelerate. Thus total assets of allscheduled commercial banks by end March 2010 may be taken as Rs.40,90,000crore as a working estimate. At that level, the annual composite rate of growth intotal assets of Scheduled Commercial Banks would be about 13.4 per cent to beover 2002-03 as compared to 16.7 per cent between 1994-95 and 2002-03. It willform about 65 per cent of GDP at current market prices as compared to 67 per centin 2002-03.On the liability side, there may be large augmentation to capital base. Reserves arelikely to increase substantially. Banks will relay more on borrowed funds. Hence, 11
  • 12. the pace of accretion to deposits may slow down.On the asset side, the pace of growth in both advances and investment mayslacken. However, under advances, the share of bills may increase. Similarly,under investment, the share of „others‟ may increase. The Macro-magnitude ofIndian banking sector visualized for the year 2010 is given in Annexure – I. 12
  • 13. CHAPTER – 3 FUTURE LANDSCAPE OF INDIAN BANKING3.1 Liberalization and de-regulation process started in 1991-92 has made a seachange in the banking system. From a totally regulated environment, we havegradually moved into a market driven competitive system. Our move towards globalbenchmarks has been, by and large, calibrated and regulator driven. The pace ofchanges gained momentum in the last few years. Globalization would gain greaterspeed in the coming years particularly on account of expected opening up offinancial services under WTO. Four trends change the banking industry world over,viz. 1) Consolidation of players through mergers and acquisitions, 2) Globalisation ofoperations, 3) Development of new technology and 4) Universalisation of banking.With technology acting as a catalyst, we expect to see great changes in the bankingscene in the coming years. The Committee has attempted to visualize the financialworld 5-10 years from now. The picture that emerged is somewhat as discussedbelow. It entails emergence of an integrated and diversified financial system. Themove towards universal banking has already begun. This will gather furthermomentum bringing non-banking financial institutions also, into an integratedfinancial system.3.2 The traditional banking functions would give way to a system geared to meet allthe financial needs of the customer. We could see emergence of highly variedfinancial products, which are tailored to meet specific needs of the customers in theretail as well as corporate segments. The advent of new technologies could see theemergence of new financial players doing financial intermediation. For example, wecould see utility service providers offering say, bill payment services or supermarketsor retailers doing basic lending operations. The conventional definition of bankingmight undergo changes.3.3 The competitive environment in the banking sector is likely to result in individualplayers working out differentiated strategies based on their strengths and marketniches. For example, some players might emerge as specialists in mortgageproducts, credit cards etc. whereas some could choose to concentrate on particular 13
  • 14. segments of business system, while outsourcing all other functions. Some otherbanks may concentrate on SME segments or high net worth individuals by providingspecially tailored services beyond traditional banking offerings to satisfy the needs ofcustomers they understand better than a more generalist competitor.3.4 International trade is an area where India‟s presence is expected to showappreciable increase. Presently, Indian share in the global trade is just about 0.8%.The long term projections for growth in international trade is placed at an average of6% per annum. With the growth in IT sector and other IT Enabled Services, there istremendous potential for business opportunities. Keeping in view the GDP growthforecast under India Vision 2020, Indian exports can be expected to grow at asustainable rate of 15% per annum in the period ending with 2010. This again willoffer enormous scope to Banks in India to increase their forex business andinternational presence. Globalization would provide opportunities for Indiancorporate entities to expand their business in other countries. Banks in India wantingto increase their international presence could naturally be expected to follow thesecorporates and other trade flows in and out of India.3.5 Retail lending will receive greater focus. Banks would compete with one anotherto provide full range of financial services to this segment. Banks would use multipledelivery channels to suit the requirements and tastes of customers. While somecustomers might value relationship banking (conventional branch banking), othersmight prefer convenience banking (e-banking).3.6 One of the concerns is quality of bank lending. Most significant challenge beforebanks is the maintenance of rigorous credit standards, especially in an environmentof increased competition for new and existing clients. Experience has shown usthat the worst loans are often made in the best of times. Compensation throughtrading gains is not going to support the banks forever. Large-scale efforts areneeded to upgrade skills in credit risk measuring, controlling and monitoring as alsorevamp operating procedures. Credit evaluation may have to shift from cash flowbased analysis to “borrower account behaviour”, so that the state of readiness ofIndian banks for Basle II regime improves. Corporate lending is already undergoing 14
  • 15. changes. The emphasis in future would be towards more of fee based servicesrather than lending operations. Banks will compete with each other to provide valueadded services to their customers.3.7 Structure and ownership pattern would undergo changes. There would begreater presence of international players in the Indian financial system. Similarly,some of the Indian banks would become global players. Government is taking stepsto reduce its holdings in Public sector banks to 33%. However the indications arethat their PSB character may still be retained.3.8 Mergers and acquisitions would gather momentum as managements will strive tomeet the expectations of stakeholders. This could see the emergence of 4-5 worldclass Indian Banks. As Banks seek niche areas, we could see emergence of somenational banks of global scale and a number of regional players.3.9 Corporate governance in banks and financial institutions would assume greaterimportance in the coming years and this will be reflected in the composition of theBoards of Banks.3.10 Concept of social lending would undergo a change. Rather than being seen asdirected lending such lending would be business driven. With SME sector expectedto play a greater role in the economy, Banks will give greater overall focus in thisarea. Changes could be expected in the delivery channels used for lending to smallborrowers and agriculturalists and unorganized sectors (micro credit). Use ofintermediaries or franchise agents could emerge as means to reduce transactioncosts.3.11 Technology as an enabler is separately discussed in the report. It would not beout of place, however, to state that most of the changes in the landscape of financialsector discussed above would be technology driven. In the ultimate analysis,successful institutions will be those which continue to leverage the advancements intechnology in re-engineering processes and delivery modes and offering state-of-the-art products and services providing complete financial solutions for different 15
  • 16. types of customers.3.12 Human Resources Development would be another key factor defining thecharacteristics of a successful banking institution. Employing and retaining skilledworkers and specialists, re-training the existing workforce and promoting a culture ofcontinuous learning would be a challenge for the banking institutions. 16
  • 17. CHAPTER - 4 CHANGES IN THE STRUCTURE OF BANKS4.1 The financial sector reforms ushered in the year 1991 have been well calibratedand timed to ensure a smooth transition of the system from a highly regulated regimeto a market economy. The first phase of reforms focused on modification in thepolicy framework, improvement in financial health through introduction of variousprudential norms and creation of a competitive environment. The second phase ofreforms started in the latter half of 90s, targeted strengthening the foundation ofbanking system, streamlining procedures, upgrading technology and humanresources development and further structural changes. The financial sector reformscarried out so far have made the balance sheets of banks look healthier and helpedthem move towards achieving global benchmarks in terms of prudential norms andbest practices.4.2 Under the existing Basel Capital Accord, allocation of capital follows aone-size-fit-all approach. This would be replaced by a risk based approach to capitalallocation. While regulatory minimum capital requirements would still continue to berelevant and an integral part of the three pillar approach under Basel II, the emphasisis on risk based approach relying on external ratings as well as internal rating ofeach asset and capital charge accordingly. The internal risk based approach wouldneed substantial investments in technology and development of MIS tools. For arating tool for internal assessment to be effective, past data for 3 to 5 years would berequired and as such, Indian banking system will have to build up the capabilities fora smooth migration to the new method.Another aspect which is included in Basel II accord is a provision for capitalallocation for operational risk. This is a new parameter and even internationallyevaluation tools are not yet fully developed. This would be another area wherebanking system will have to reckon additional capital needs and functioning of itsprocesses.4.3 The financial sector reforms have brought in the much needed competition in the 17
  • 18. market place. The competition to the existing banks came mainly from the techno-savvy private sector banks. In the coming years, we expect to see greater flow offoreign capital to come into the Indian banking sector. Opening up of banking sectorto global players would see banks facing global competition.4.4 Technology is expected to be the main facilitator of change in the financialsector. Implementation of technology solutions involves huge capital outlay.Besides the heavy investment costs, technology applications also have a highdegree of obsolescence. Banks will need to look for ways to optimize resources fortechnology applications. In this regard, global partnerships on technology and skillssharing may help.4.5 The pressure on capital structure is expected to trigger a phase of consolidationin the banking industry. Banks could achieve consolidation through different ways.Mergers and acquisitions could be one way to achieve this. In the past, mergerswere initiated by regulators to protect the interests of depositors of weak banks. Inrecent years, market led mergers between private banks have taken place. It isexpected that this process would gain momentum in the coming years. Mergersbetween public sector banks or public sector banks and private banks could be thenext logical thing / development to happen as market players tend to consolidatetheir position to remain in competition.4.6 Consolidation could take place through strategic alliances / partnerships.Besides helping banks to achieve economy of scale in operations and augmentcapital base, consolidation could help market players in other ways also tostrengthen their competitiveness. The advantage could be in achieving bettersegmentation in the market. Strategic alliances and collaborative approach, as analternative to mergers and acquisitions, could be attempted to reduce transactioncosts through outsourcing, leverage synergies in operations and avoid problemsrelated to cultural integration. If consolidation is taken too far, it could lead to misuseof dominant market positions. Rapid expansion in foreign markets without sufficientknowledge of local economic conditions could increase vulnerability of individualbanks. 18
  • 19. 4.7 Public Sector Banks had, in the past, relied on Government support for capitalaugmentation. However, with the Government making a conscious decision toreduce its holding in Banks, most Banks have approached the capital market forraising resources. This process could gain further momentum when the governmentholding gets reduced to 33% or below. It is expected that pressures of marketforces would be the determining factor for the consolidation in the structure of thesebanks. If the process of consolidation through mergers and acquisitions gainsmomentum, we could see the emergence of a few large Indian banks withinternational character. There could be some large national banks and several locallevel banks.4.8 Opening up of the financial sector from 2005, under WTO, would see a numberof Global banks taking large stakes and control over banking entities in the country.They would bring with them capital, technology and management skills. This willincrease the competitive spirit in the system leading to greater efficiencies.Government policy to allow greater FDI in banking and the move to amend BankingRegulation Act to remove the existing 10% cap on voting rights of shareholders arepointers to these developments.4.9 The cooperative banks have played a crucial part in the development of theeconomy. The primary agricultural societies which concentrate on short-term creditand rural investment credit institutions supported by District / State level cooperativebanks have played a crucial role in the credit delivery in rural areas. The UrbanCooperative Banks have found their own niche in urban centres. These institutionsin the cooperative sector need urgent capital infusion to remain as sound financialentities. Cooperative sector comes under State jurisdiction while commercialbanking operations are regulated by the Reserve Bank of India. The duality incontrol had weakened the supervisory set up for these institutions. It is expected thatcertain amendments to the Banking Regulation Act introduced recently in theParliament with the objective of strengthening the regulatory powers of the ReserveBank of India would pave the way for strengthening of cooperative / financialinstitutions. It is expected that these banks would upgrade skills of their staff and 19
  • 20. improve the systems and procedures to compete with commercial bank entities.4.10 Consolidation would take place not only in the structure of the banks, but also inthe case of services. For instance, some banks would like to shed their non-corebusiness portfolios to others. This could see the emergence of niche players indifferent functional areas and business segments such as housing, cards, mutualfunds, insurance, sharing of their infrastructure including ATM Network, etc.4.11 Rationalization of a very large network of branches, which at present hasrendered the system cost ineffective and deficient in service would take place. Mostof the banks would have adopted core-banking solutions in a fully networkedenvironment. Back office functions would be taken away from branches to acentralized place. While brick and mortar branches would continue to be relevant inthe Indian scenario, the real growth driver for cost cutting would be virtual branchesviz., ATMs, Internet Banking, mobile banking, kiosks etc., which can be manned by afew persons and run on 24 x 7 basis to harness the real potential of thesetechnological utilities, there will be strategic alliances / partnership amongst banksand this phenomenon has already set in.4.12 As we move along, the concept of branch banking will undergo changes. Bankswill find that many of the functions could be outsourced more profitably withoutcompromising on the quality of service. Specialized agencies could come forward toundertake Marketing and delivery functions on behalf of banks. This could seebanking products being sold outside the four walls of a branch. Banks would thenconcentrate on developing new products and earning fee based income.4.13 The composition of bank staff will change. As total computerization will render apart of the workforce surplus, banks will go for a rightsizing exercise. Some mayresort to another round of VRS to shed excess flab while some other may go for re-deployment to strengthen marketing arms. With greater use of technology andoutsourcing of services in different areas, the manpower recruitment will mostly be inspecialized areas and technology applications. With commitment shifting from theorganization to the profession, we could see greater lateral movement of banking 20
  • 21. personnel. Training and skill development will, however, continue to be key HRfunctions. With the age profile of staff undergoing changes, banks will have to focuson leadership development and succession planning. Knowledge management willbecome a critical issue.4.14 Management structure of banks will also undergo drastic changes in the comingyears. Instead of the present pyramid structure, the banks will move towardsreduction in tiers to ultimately settle for a flat structure. Product-wise segmentationwill facilitate speedier decision-making.(The existing structure of banks in India, their balance sheet composition andworking results as on 31st March, 2003 are given in Annexures II, III and IV.) 21
  • 22. CHAPTER 5 PRODUCT INNOVATION AND PROCESS RE-ENGINEERING5.1 With increased competition in the banking Industry, the net interest margin ofbanks has come down over the last one decade. Liberalization with Globalization willsee the spreads narrowing further to 1-1.5% as in the case of banks operating indeveloped countries. Banks will look for fee-based income to fill the gap in interestincome. Product innovations and process re-engineering will be the order of the day.The changes will be motivated by the desire to meet the customer requirements andto reduce the cost and improve the efficiency of service. All banks will therefore gofor rejuvenating their costing and pricing to segregate profitable and non-profitablebusiness. Service charges will be decided taking into account the costing and whatthe traffic can bear. From the earlier revenue = cost + profit equation i.e.,customers are charged to cover the costs incurred and the profits expected, mostbanks have already moved into the profit =revenue - cost equation. This has beenreflected in the fact that with cost of services staying nearly equal across banks, thebanks with better cost control are able to achieve higher profits whereas the bankswith high overheads due to under-utilisation of resources, un-remunerative branchnetwork etc., either incurred losses or made profits not commensurate with thecapital employed. The new paradigm in the coming years will be cost = revenue -profit.5.2 As banks strive to provide value added services to customers, the market willsee the emergence of strong investment and merchant banking entities. Productinnovation and creating brand equity for specialized products will decide the marketshare and volumes. New products on the liabilities side such as forex linkeddeposits, investment-linked deposits, etc. are likely to be introduced, as investorswith varied risk profiles will look for better yields. There will be more and more of tie-ups between banks, corporate clients and their retail outlets to share a commonplatform to shore up revenue through increased volumes. 22
  • 23. 5.3 Banks will increasingly act as risk managers to corporate and other entities byoffering a variety of risk management products like options, swaps and other aspectsof financial management in a multi currency scenario. Banks will play an active rolein the development of derivative products and will offer a variety of hedge products tothe corporate sector and other investors. For example, Derivatives in emergingfutures market for commodities would be an area offering opportunities for banks. Asthe integration of markets takes place internationally, sophistication in trading andspecialized exchanges for commodities will expand. As these changes take place,banking will play a major role in providing financial support to such exchanges,facilitating settlement systems and enabling wider participation.5.4 Bancassurance is catching up and Banks / Financial Institutions have startedentering insurance business. From mere offering of insurance products throughnetwork of bank branches, the business is likely to expand through self-designedinsurance products after necessary legislative changes. This could lead to a spurt infee-based income of the banks.5.5 Similarly, Banks will look analytically into various processes and practices asthese exist today and may make appropriate changes therein to cut costs anddelays. Outsourcing and adoption of BPOs will become more and more relevant,especially when Banks go in for larger volumes of retail business. However, byincreasing outsourcing of operations through service providers, banks are makingthemselves vulnerable to problems faced by these providers. Banks shouldtherefore outsource only those functions that are not strategic to banks‟ business.For instance, in the wake of implementation of 90 days‟ delinquency norms forclassification of assets, some banks may think of engaging external agencies forrecovery of their dues and in NPA management.5.6 Banks will take on competition in the front end and seek co-operation in the backend, as in the case of networking of ATMs. This type of co-opetition will becomethe order of the day as Banks seek to enlarge their customer base and at the sametime to realize cost reduction and greater efficiency. 23
  • 24. CHAPTER 6 TECHNOLOGY IN BANKING6.1 Technology will bring fundamental shift in the functioning of banks. It would notonly help them bring improvements in their internal functioning but also enable themto provide better customer service. Technology will break all boundaries andencourage cross border banking business. Banks would have to undertake extensiveBusiness Process Re-Engineering and tackle issues like a) how best to deliverproducts and services to customers b) designing an appropriate organizationalmodel to fully capture the benefits of technology and business process changesbrought about. c) how to exploit technology for deriving economies of scale and howto create cost efficiencies, and d) how to create a customer - centric operationmodel.6.2 Entry of ATMs has changed the profile of front offices in bank branches.Customers no longer need to visit branches for their day to day banking transactionslike cash deposits, withdrawals, cheque collection, balance enquiry etc. E-bankingand Internet banking have opened new avenues in “convenience banking”. Internetbanking has also led to reduction in transaction costs for banks to about a tenth ofbranch banking.6.3 Technology solutions would make flow of information much faster, more accurateand enable quicker analysis of data received. This would make the decision makingprocess faster and more efficient. For the Banks, this would also enabledevelopment of appraisal and monitoring tools which would make creditmanagement much more effective. The result would be a definite reduction intransaction costs, the benefits of which would be shared between banks andcustomers.6.4 While application of technology would help banks reduce their operating costs inthe long run, the initial investments would be sizeable. IT spent by banking andfinancial services industry in USA is approximately 7% of the revenue as againstaround 1% by Indian Banks. With greater use of technology solutions, we expect IT 24
  • 25. spending of Indian banking system to go up significantly.6.5 One area where the banking system can reduce the investment costs intechnology applications is by sharing of facilities. We are already seeing bankscoming together to share ATM Networks. Similarly, in the coming years, we expectto see banks and FIs coming together to share facilities in the area of payment andsettlement, back office processing, data warehousing, etc. While dealing withtechnology, banks will have to deal with attendant operational risks. This would be acritical area the Bank management will have to deal with in future.6.6 Payment and Settlement system is the backbone of any financial market place.The present Payment and Settlement systems such as Structured FinancialMessaging System (SFMS), Centralised Funds Management System (CFMS),Centralised Funds Transfer System (CFTS) and Real Time Gross SettlementSystem (RTGS) will undergo further fine-tuning to meet international standards.Needless to add, necessary security checks and controls will have to be in place. Inthis regard, Institutions such as IDRBT will have a greater role to play. 25
  • 26. CHAPTER 7 RISK MANAGEMENT7.1 Risk is inherent in any commercial activity and banking is no exception to thisrule. Rising global competition, increasing deregulation, introduction of innovativeproducts and delivery channels have pushed risk management to the forefront oftoday‟s financial landscape. Ability to gauge the risks and take appropriateposition will be the key to success. It can be said that risk takers will survive,effective risk managers will prosper and risk averse are likely to perish. In theregulated banking environment, banks had to primarily deal with credit or default risk.As we move into a perfect market economy, we have to deal with a whole range ofmarket related risks like exchange risks, interest rate risk, etc. Operational risk,which had always existed in the system, would become more pronounced in thecoming days as we have technology as a new factor in today‟s banking. Traditionalrisk management techniques become obsolete with the growth of derivatives and off-balance sheet operations, coupled with diversifications. The expansion in E-bankingwill lead to continuous vigilance and revisions of regulations.7.2 Building up a proper risk management structure would be crucial for the banks inthe future. Banks would find the need to develop technology based risk managementtools. The complex mathematical models programmed into risk engines wouldprovide the foundation of limit management, risk analysis, computation of risk-adjusted return on capital and active management of banks‟ risk portfolio.Measurement of risk exposure is essential for implementing hedging strategies.7.3 Under Basel II accord, capital allocation will be based on the risk inherent in theasset. The implementation of Basel II accord will also strengthen the regulatoryreview process and, with passage of time, the review process will be more and moresophisticated. Besides regulatory requirements, capital allocation would also bedetermined by the market forces. External users of financial information willdemand better inputs to make investment decisions. More detailed and morefrequent reporting of risk positions to banks‟ shareholders will be the order of theday. There will be an increase in the growth of consulting services such as data 26
  • 27. providers, risk advisory bureaus and risk reviewers. These reviews will be intendedto provide comfort to the bank managements and regulators as to the soundness ofinternal risk management systems.7.4 Risk management functions will be fully centralized and independent from thebusiness profit centres. The risk management process will be fully integrated intothe business process. Risk return will be assessed for new business opportunitiesand incorporated into the designs of the new products. All risks – credit, market andoperational and so on will be combined, reported and managed on an integratedbasis. The demand for Risk Adjusted Returns on Capital (RAROC) basedperformance measures will increase. RAROC will be used to drive pricing,performance measurement, portfolio management and capital management.7.5 Risk management has to trickle down from the Corporate Office to branches oroperating units. As the audit and supervision shifts to a risk based approach ratherthan transaction orientation, the risk awareness levels of line functionaries also willhave to increase. Technology related risks will be another area where the operatingstaff will have to be more vigilant in the coming days.7.6 Banks will also have to deal with issues relating to Reputational Risk as they willneed to maintain a high degree of public confidence for raising capital and otherresources. Risks to reputation could arise on account of operational lapses,opaqueness in operations and shortcomings in services. Systems and internalcontrols would be crucial to ensure that this risk is managed well.7.7 The legal environment is likely to be more complex in the years to come.Innovative financial products implemented on computers, new risk managementsoftware, user interfaces etc., may become patentable. For some banks, this couldoffer the potential for realizing commercial gains through licensing. 27
  • 28. 7.8 Advances in risk management (risk measurement) will lead to transformation incapital and balance sheet management. Dynamic economic capital managementwill be a powerful competitive weapon. The challenge will be to put all thesecapabilities together to create, sustain and maximise shareholders‟ wealth. Thebank of the future has to be a total-risk-enabled enterprise, which addresses theconcerns of various stakeholders‟ effectively.7.9 Risk management is an area the banks can gain by cooperation and sharing ofexperience among themselves. Common facilities could be considered fordevelopment of risk measurement and mitigation tools and also for training of staff atvarious levels. Needless to add, with the establishment of best risk managementsystems and implementation of prudential norms of accounting and assetclassification, the quality of assets in commercial banks will improve on the one handand at the same time, there will be adequate cover through provisioning for impairedloans. As a result, the NPA levels are expected to come down significantly. 28
  • 29. CHAPTER - 8 REGULATORY AND LEGAL ENVIRONMENT8.1 The advent of liberalization and globalization has seen a lot of changes in thefocus of Reserve Bank of India as a regulator of the banking industry. De-regulationof interest rates and moving away from issuing operational prescriptions have beenimportant changes. The focus has clearly shifted from micro monitoring to macromanagement. Supervisory role is also shifting more towards off-site surveillancerather than on-site inspections. The focus of inspection is also shifting fromtransaction-based exercise to risk-based supervision. In a totally de-regulated andglobalised banking scenario, a strong regulatory framework would be needed. Therole of regulator would be critical for: a) ensuring soundness of the system by fixing benchmark standards for capital adequacy and prudential norms for key performance parameters. b) adoption of best practices especially in areas like risk-management, provisioning, disclosures, credit delivery, etc. c) adoption of good corporate governance practices. d) creation of an institutional framework to protect the interest of depositors. e) regulating the entry and exit of banks including cross-border institutions.Further, the expected integration of various intermediaries in the financial systemwould add a new dimension to the role of regulators. Also as the co-operative banksare expected to come under the direct regulatory control of RBI as against the dualcontrol system in vogue, regulation and supervision of these institutions will get anew direction.Some of these issues are addressed in the recent amendment Bill to the BankingRegulation Act introduced in the Parliament.8.2 The integration of various financial services would need a number of legislativechanges to be brought about for the system to remain contemporary andcompetitive. The need for changes in the legislative framework has been felt inseveral areas and steps have been taken in respect of many of these issues, suchas, 29
  • 30. i) abolition of SICA / BIFR setup and formation of a National Company Law Tribunal to take up industrial re-construction. Ii) enabling legislation for sharing of credit information about borrowers among lending institutions.Integration of the financial system would change the way we look at bankingfunctions. The present definition of banking under Banking Regulation Act wouldrequire changes, if banking institutions and non-banking entities are to merge intoa unified financial system8.3 While the recent enactments like amendments to Debt Recovery Tribunal(DRT) procedures and passage of Securitisation and Reconstruction of FinancialAssets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) havehelped to improve the climate for recovery of bank dues, their impact is yet to befelt at the ground level. It would be necessary to give further teeth to thelegislations, to ensure that recovery of dues by creditors is possible within areasonable time. The procedure for winding up of companies and sale of assetswill also have to be streamlined.8.4 In the recent past, Corporate Debt Restructuring has evolved as an effectivevoluntary mechanism. This has helped the banking system to take timelycorrective actions when borrowing corporates face difficulties. With theborrowers gaining confidence in the mechanism, it is expected that CDR setupwould gain more prominence making NPA management somewhat easier. It isexpected that the issue of giving statutory backing for CDR system will bedebated in times to come.8.5 In the emerging banking and financial environment there would be anincreased need for self-regulation. This is all the more relevant in the context ofthe stated policy of RBI to move away from micro-management issues.Development of best practices in various areas of banks‟ working would evolvethrough self-regulation rather than based on regulatory prescriptions. 30
  • 31. 8.6 Role of Indian Banks‟ Association would become more pronounced as a selfregulatory body. Development of benchmarks on risk management, corporategovernance, disclosures, accounting practices, valuation of assets, customercharter, Lenders‟ Liability, etc. would be areas where IBA would be required toplay a more proactive role. The Association would also be required to act as alobbyist for getting necessary legislative enactments and changes in regulatoryguidelines.8.7 HR practices and training needs of the banking personnel would assumegreater importance in the coming days. Here again, common benchmarks couldbe evolved.Talking about shared services, creation of common database and conductingresearch on contemporary issues to assess anticipated changes in the businessprofile and market conditions would be areas where organizations like IndianBanks‟ Association are expected to play a greater role.8.8 Evolution of Corporate Governance being adopted by banks, particularlythose who have gone public, will have to meet global standards over a period oftime. In future, Corporate Governance will guide the way Banks are to be run.Good Corporate Governance is not a straight jacketed formula or process; thereare many ways of achieving it as international comparisons demonstrate,provided the following three basic principles are followed:-a) Management should be free to drive the enterprise forward with the minimum interference and maximum motivation.b) Management should be accountable for the effective and efficient use of this freedom. There are two levels of accountability – of management to the Board and of the Board to the Shareholders. The main task is to ensure the continued competence of management, for without adequate and effective drive, any business is doomed to decline. As stated by J.Wolfensohn, President, World Bank – “Corporate governance is about promoting 31
  • 32. corporate fairness, transparency and accountability”. c) In order to enlist the confidence of the global investors and international market players, the banks will have to adopt the best global practices of financial accounting and reporting. This would essentially involve adoption of judgmental factors in the classification of assets, based on Banks‟ estimation of the future cash flows and existing environmental factors, besides strengthening the capital base accordingly.8.9 When we talk about adoption of International accounting practices andreporting formats it is relevant to look at where we stand and the way ahead.Accounting practices being followed in India are as per Accounting Standards set bythe Institute of Chartered Accountants of India (ICAI). Companies are required tofollow disclosure norms set under the Companies Act and SEBI guidelines relating tolisted entities. Both in respect of Accounting Practices and disclosures, banks inIndia are guided by the Reserve bank of India guidelines issued from time to time.Now these are, by and large, in line with the Accounting Standards of ICAI and otherregulatory bodies. It is pertinent to note that Accounting Standards of ICAI are basedon International Accounting Standards (IAS) being followed in a large number ofcountries. Considering that US forms 40% of the financial markets in the worldcompliance with USGAAP has assumed greater importance in recent times. ManyIndian banks desirous of raising resources in the US market have adoptedaccounting practices under USGAAP and we expect more and more Indian Financialentities to move in this direction in the coming years.There are certain areas of differences in the approach under the two maininternational accounting standards being followed globally. Of late, there have beenmoves for convergence of accounting standards under IAS and USGAAP and thisrequires the standard setters to agree on a single, high-quality answer. Discussionsin the accounting circles indicate that convergence of various internationalaccounting standards into a single global standard would take place by 2007. 32
  • 33. In the Indian context, one issue which is likely to be discussed in the coming years isthe need for a common accounting standard for financial entities. While a separatestandard is available for financial entities under IAS, ICAI has not so far come outwith an Indian version in view of the fact that banks, etc. are governed by RBIguidelines. It is understood that ICAI is seized of the matter. It is expected thatbanks would migrate to global accounting standards smoothly in the light of thesedevelopments, although it would mean greater disclosure and tighter norms. 33
  • 34. CHAPTER – 9 RURAL AND SOCIAL BANKING ISSUES9.1 Since the second half of 1960s, commercial banks have been playing animportant role in the socio-economic transformation of rural India. Besides activelyimplementing Government sponsored lending schemes, Banks have been providingdirect and indirect finance to support economic activities. Mandatory lending to thepriority sectors has been an important feature of Indian banking. The Narasimhamcommittee had recommended for doing away with the present system of directedlending to priority sectors in line with liberalization in the financial system. Therecommendations were, however, not accepted by the Government. In the prevailingpolitical climate in the country any drastic change in the policy in this regard appearsunlikely.9.2 The banking system is expected to reorient its approach to rural lending. “GoingRural” could be the new market mantra. Rural market comprises 74% of thepopulation, 41% of Middle class and 58% of disposable income. Consumer growth istaking place at a fast pace in 17113 villages with a population of more than 5000.Of these, 9989 villages are in 7 States, namely Andhra Pradesh, Bihar, Kerala,Maharashtra, Tamilnadu, Uttar Pradesh and West Bengal. Banks‟ approach to therural lending will be guided mainly by commercial considerations in future.9.3 Commercial Banks, Co-operatives and Regional Rural Banks are the three majorsegments of rural financial sector in India. Rural financial system, in future has achallenging task of facing the drastic changes taking place in the banking sector,especially in the wake of economic liberalization. There is an urgent need for ruralfinancial system to enlarge their role functions and range of services offered so as toemerge as "one stop destination for all types of credit requirements of people inrural/semi-urban centres. 34
  • 35. 9.4 Barring commercial banks, the other rural financial institutions have a weakstructural base and the issue of their strengthening requires to be taken up onpriority. Co-operatives will have to be made viable by infusion of capital. Bringing allcooperative institutions under the regulatory control of RBI would help in bettercontrol and supervision over the functioning of these institutions. Similarly RegionalRural banks (RRBs) as a group need to be made structurally stronger. It would bedesirable if NABARD takes the initiative to consolidate all the RRBs into a strongrural development entity.9.5 Small Scale Industries have, over the last five decades, emerged as a majorcontributor to the economy, both in terms of employment generation and share inmanufactured output and exports. SSIs account for 95% of the industrial units andcontribute about 40% of the value addition in the manufacturing sector. There aremore than 32 lac units spread all over the country producing over 7500 items andproviding employment to more than 178 lac persons. The employment generationpotential and favourable capital-output ratio would make small scale sector remainimportant for policy planners.9.6 Removal of quantitative restrictions on a large number of items under the WTOand opening up of Indian market to greater international competition have thrownboth challenges and opportunities for the SSI sector. Low capital base and weakmanagement structure make these units vulnerable to external shocks, more easily.However the units which can adopt to the changing environment and showimagination in their business strategy will thrive in the new environment.9.7 Instead of following the narrow definition of SSI, based on the investment infixed assets, there is a move to look at Small and Medium Enterprises (SME) as agroup for policy thrust and encouragement. For SMEs, banks should explore theoption of E-banking channels to develop web-based relationship banking models,which are customer-driven and more cost-effective. Government is alreadyconsidering a legislation for the development of SME sector to facilitate its orderlygrowth. 35
  • 36. 9.8 In the next ten years, SME sector will emerge more competitive and efficient andknowledge-based industries are likely to acquire greater prominence. SMEs will bedominating in industry segments such as Pharmaceuticals, Information Technologyand Biotechnology. With SME sector emerging as a vibrant sector of the Indianeconomy, flow of credit to this sector would go up significantly. Banks will have tosharpen their skills for meeting the financial needs of this segment. Some of theBanks may emerge as niche players in handling SME finance. Flow of credit to thisSector will be guided purely by commercial considerations as Banks will find SMEsas an attractive business proposition. 36
  • 37. CHAPTER – 10 HUMAN RESOURCES MANAGEMENT10.1 The key to the success of any organization lies in how efficiently the organization manages its‟ human resources. The principle applies equally and perhaps more aptly to service institutions like banks. The issue is all the more relevant to the public sector banks who are striving hard to keep pace with the technological changes and meet the challenges of globalization.10.2 In order to meet the global standards and to remain competitive, banks will have to recruit specialists in various fields such as Treasury Management, Credit, Risk Management, IT related services, HRM, etc. in keeping with the segmentation and product innovation. As a complementary measure, fast track merit and performance based promotion from within would have to be institutionalized to inject dynamism and youthfulness in the workforce.10.3 To institutionalize talent management, the first priority for the banking industry would be to spot, recognize and nurture the talent from within. Secondly, the industry has to attract the best talent from the market to maintain the required competitive edge vis-a-vis global players. However, the issue of critical importance is how talent is integrated and sustained in the banks. Therefore, a proper system of talent management has to be put in place by all the banks.10.4 As the entire Indian banking industry is witnessing a paradigm shift in systems, processes, strategies, it would warrant creation of new competencies and capabilities on an on-going basis for which an environment of continuous learning would have to be created so as to enhance knowledge and skills.10.5 Another important ingredient of HR management is reward and compensation which at present do not have any linkage to skills and performance. A system of reward and compensation that attracts, recognizes and retains the talent, 37
  • 38. and which is commensurate with performance is an urgent need of the industry.10.6 An equally important issue relevant to HRM is to create a conducive working environment in which the bankers can take commercial decisions judiciously and, at the same time, without fear. This calls for a re-look into the vigilance system as it exists today, and perhaps there is a need to keep the banking industry out of the CVC. The Banks‟ Boards may be allowed to have their own system of appropriate checks and balances as well as accountability. 38
  • 39. ACTION POINTS ARISING OUT OF VISION REPORT1. Banks will have to adopt global standards in capital adequacy, income recognition and provisioning norms.2. Risk management setup in Banks will need to be strengthened. Benchmark standards could be evolved.3. Payment and settlement system will have to be strengthened to ensure transfer of funds on real time basis eliminating risks associated with transactions and settlement process.4. Regulatory set-up will have to be strengthened, in line with the requirements of a market-led integrated financial system5. Banks will have to adopt best global practices, systems and procedures.6. Banks may have to evaluate on an ongoing basis, internally, the need to effect structural changes in the organisation. This will include capital restructuring through mergers / acquisitions and other measures in the best business interests. IBA and NABARD may have to play a suitable role in this regard.7. There should be constant and continual upgradation of technology in the Banks, benefiting both the customer and the bank. Banks may enter into partnership among themselves for reaping maximum benefits, through consultations and coordination with reputed IT companies.8. The skills of bank staff should be upgraded continuously through training. In this regard, the banks may have to relook at the existing training modules and effect necessary changes, wherever required. Seminars and conferences on all relevant and emerging issues should be encouraged. 39
  • 40. 9. Banks will have to set up Research and Market Intelligence units within the organization, so as to remain innovative, to ensure customer satisfaction and to keep abreast of market developments. Banks will have to interact constantly with the industry bodies, trade associations, farming community, academic / research institutions and initiate studies, pilot projects, etc. for evolving better financial models.10. Industry level initiatives will have to be taken, may be at IBA level, to speed up reform measures in legal and regulatory environment. (S C Gupta) Chairman & Managing Director Indian Overseas Bank Chairman of the committee Dated Members: Shri P K Gupta Executive Director Corporation Bank Shri P H Ravikumar Managing Director & CEO National Commodities & Derivatives Exchange Ltd. 40
  • 41. Shri A BalasubramanianGeneral ManagerPunjab National BankShri GopalakrishnanGeneral Manager – HRDUnion Bank of IndiaShri K E VenugopalDy. General ManagerIndian Overseas BankShri Shailendra M MaruDy. General ManagerState Bank of IndiaShri Umesh Chand AsawaDy. General ManagerA P Mahesh Co-op Bank Ltd.Shri Uday SareenVice PresidentCitibank N.A.Shri Y Sankarsan RaoVice PresidentThe Vysya Bank Ltd.Shri Dinanath DubhashiHead-Business Dev. & Cash Mgt.- Corp. Bkg.BNP Paribas 41
  • 42. Dr. B L SrivastavAsst. General ManagerBank of BarodaShri R K JainAsst. General Manager (CP)Allahabad BankShri C V R RajendranAsst. General ManagerCorporation BankShri R.B. MenonAsst. General ManagerUnion Bank of IndiaShri Janmejoy PatnaikChief ManagerCentral Bank of IndiaFrom IBAShri. H.N.SinorChief ExecutiveIndian Banks‟ AssociationShri. K.UnnikrishnanSenior Vice President (Policy)Indian Banks‟ Association 42
  • 43. AcknowledgementI thank all the members of the Committee for their valuable inputs in thepreparation of this Report. I also thank the Managing Committee of the IBA fortheir feedback and suggestions.My special thanks to the Indian Banks‟ Association for giving me thisopportunity.Mumbai (S.C.GUPTA)Nov.19, 2003 43